The Last Distribution Is the Only One That Can Include Private Assets.

Before the final distribution, the model agreement permits only cash or Marketable Securities. At that boundary the restriction lifts, and private assets are treated as sold at a value the general partner determines.

By Owen E. H. Meyer · June 4, 2026 · 6 min read

A final distribution notice arrives listing units of an unlisted holding and a value per unit. Nothing has gone wrong and nothing about the notice is irregular. The clause that confined every previous distribution to cash or Marketable Securities has stopped applying. If the fund chooses to distribute private assets in kind, an investor that did not elect out may finish the fund holding an illiquid position, credited for waterfall purposes at a value determined by the general partner.

Cash or Marketable Securities, until the last one

Section 14.4.1 of ILPA's model agreement is one sentence: "Prior to the final distribution of assets in connection with the dissolution and winding up of the Fund, the Fund may distribute only cash or Marketable Securities to a Partner." Note what it does at the boundary. It stops restricting, which is not the same as permitting: it does not authorise an in-kind final distribution, and it does not require one. What it does is remove the restriction that had required illiquid assets to be converted into cash before they could be distributed.

Marketable Securities is a defined term doing real work here. The model reaches securities admitted to a recognised exchange, free of legal or contractual restrictions on transfer, and readily saleable at their Value, with over-the-counter trading bracketed as a drafting choice. Everything a private fund typically holds sits outside that description: the unlisted operating company, the position subject to a lockup, the stake whose transfer needs someone's consent.

Before the final distribution, those non-marketable holdings reach investors only after being converted into cash.

The sale that is deemed to have happened

Section 14.4.3 says distributed securities or assets "shall be deemed to have been sold at the Value determined by the General Partner," and then splits. For Marketable Securities it prescribes a method precisely: the average of closing prices over the five trading days before the distribution date and the five trading days after. For other assets it says the Value is determined "considering all pertinent factors, information and data."

Those two limbs sit in the same sentence. One is mechanically reproducible from public prices; the other names no method at all, and the standard behind the Value definition is itself bracketed in the model, which leaves it a drafting choice rather than a fixed rule. The clause then treats those deemed proceeds as Distributable Proceeds and sends them through the ordinary waterfall exactly as though the fund had received cash.

Winding-up proceeds reach partners the same way, so that valuation is what sets the carried interest on the final split. For purposes of the waterfall, the model treats the resulting amount as Distributable Proceeds received by the investor. The asset has not actually been sold. If the investor later sells it, the actual price will be set in a transaction the fund is not party to.

A deemed sale settles the waterfall. It does not settle what the asset will realize.

Simplified example. The ILPA model is a starting point; every term is negotiated, and bracketed items in it are placeholders.

The election and the independent check

An investor can opt out in advance. Under §14.4.2, a limited partner that notifies the general partner in writing that it elects not to receive distributions of Securities gets none, and the general partner instead uses "commercially reasonable efforts" to sell them on that partner's behalf, with its reasonable out-of-pocket expenses deducted first. If those efforts produce a sale, that investor receives actual proceeds. The election is written against Securities, which is not necessarily every asset a fund might hold at the end.

The advisory committee can also reach the number, and it sees the number by default. The Value definition requires that all such values be disclosed to the committee at its next meeting after the determination, and §13.2.5.5 lets the committee request that any Value be confirmed, or adjusted if not confirmed, by an independent appraisal firm — selected by the general partner, approved in writing by the advisory committee, and appointed by the fund. The election and appraisal right are both conditional: one must be exercised, the other requested. That means two investors in the same fund can leave it holding different things — one with proceeds of an actual sale, the other with an asset credited at the determined Value.

The fund's final act may be a payment whose amount was determined rather than received.

Sources

ILPA Model Limited Partnership Agreement (Whole-of-Fund Waterfall), July 2020 — ILPA — §14.4.1 (only cash or Marketable Securities prior to the final distribution on dissolution and winding up); §14.4.2 (written election not to receive Securities, sale on the partner's behalf using commercially reasonable efforts, expenses deducted first); §14.4.3 (deemed sale at the Value determined by the General Partner; the five-days-before and five-days-after closing average for Marketable Securities; "considering all pertinent factors, information and data" for other assets); the definitions of Marketable Securities and Value, the latter referencing a bracketed standard; §13.2.5.5 (independent appraisal on Advisory Committee request); §14.8.1.2, under which a capital account is reduced by the Gross Asset Value of distributed property, a separate defined term from the Value in §14.4.3. A model document; every term is negotiated and bracketed items are placeholders